YEARS AGO, THE FINANCIAL INTERESTS of business owners drove much of the decision making at the local government level. Now, homeowners are the dominant force and have become very adept at using the political process to enhance the worth of their homes by blocking development.
At a HUD conference this spring, attendees heard how homeowners recognize that growth restrictions can protect their most significant asset and use it to limit the construction of affordable housing.
The strategy goes beyond the familiar NIMBY position of opposing projects that might diminish their property values, says Ron Utt, Ph.D., a senior research fellow at the Heritage Foundation, a Washington-based conservative think tank, and a speaker at the conference. Since a house is the biggest (if not the only) asset for most Americans, many homeowners have recognized that limiting growth can be a way to increase its worth.
A case in point is the urban growth boundary in Portland, Ore., designed to protect forests and farmland and limit sprawl, among other policy goals. The NAHB now ranks Portland as one of the least affordable metropolitan housing markets in the country. (Local government officials take exception with the NAHB's rating methodology.)
“It's not that people necessarily enter into the process [focused on] the dollars and cents,” Utt says, “but one of the side effects of limiting growth is you create shortages and enhance value. I've talked to people in Portland who admit how horrible the growth boundary is but say, ‘If we ever got rid of that, I'd lose $50,000 right off the top [in property value], so it's a choice of fairness for others and excessive valuation for me.'”
The tactic is being used widely by homeowners to thwart the construction of affordable housing, says Anthony Downs, senior fellow at the Brookings Institution and a visiting scholar at the Public Policy Institute of California in San Francisco. In simplistic terms, Downs says that current homeowners will oppose anything they perceive as a threat to the worth of their home.
“They're trying to protect the market value of their own homes,” Downs says. “Insofar as they have portfolios, a house is 90 percent of that. It's a natural and understandable impulse. Is it necessary to exclude all other kinds of housing from the neighborhood? I don't think so.”
Some of the most intense opposition is occurring in rural areas. The resistance is fueled by new homeowners who moved to these regions from cities and suburbs because they wanted what Utt refers to as “rustic ambience” that is diminished with additional growth.
The notion that homeowners are driving local political policies such as growth restrictions is thrashed out by Dartmouth College economist William Fischel in his book The Homevoter Hypothesis: How Home Values Influence Local Government Taxation, School Finance, and Land-Use Policies. Fischel says that homeowners use regulatory policies as a kind of insurance policy to protect their homes against unfavorable neighborhood effects.
“NIMBYism is weird only if you think about the rationally expected outcome from development,” Fischel writes in his book. “NIMBYism makes perfectly good sense if you think about the variance in expected outcomes and the fact that there isn't any way to insure against neighborhood or community-wide decline.”
Since they can't buy that kind of insurance, zoning and growth restrictions offer the next best thing—laws that limit the risk of change.
So what can builders do to respond to the phenomenon?
“Build for the rich,” Fischel says. “Every community wants [that].”